What is the accounting period principle? Who is required to adopt this principle compulsorily?
What is the accounting period principle? Who is required to adopt this principle compulsorily?
Accounting period refers to the span of time at the end of which the financial statements (profit and loss account and balance sheet) of an enterprise are prepared, to know the profitability and financial position of the business.
It is also known as periodicity principle or time period principle. According to this principle, the life of a business is divided into smaller periods (usually one year), so that, its performance can be measured on a regular basis or intervals.
According to the amended Income Tax Law, a business has to compulsorily adopt financial year beginning on 1st April and ending on 31st March in the next calendar year, as its accounting period. Apart from this, companies whose shares are listed on the stock exchange, are required to publish quarterly results to ascertain the profitability and financial position at the end of every three months period.
Accounting period refers to the span of time at the end of which the financial statements (profit and loss account and balance sheet) of an enterprise are prepared, to know the profitability and financial position of the business.
It is also known as periodicity principle or time period principle. According to this principle, the life of a business is divided into smaller periods (usually one year), so that, its performance can be measured on a regular basis or intervals.
According to the amended Income Tax Law, a business has to compulsorily adopt financial year beginning on 1st April and ending on 31st March in the next calendar year, as its accounting period. Apart from this, companies whose shares are listed on the stock exchange, are required to publish quarterly results to ascertain the profitability and financial position at the end of every three months period.
